Bank boards 'should decide bonus levels'

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Prime Minister David Cameron will set out his vision for "moral capitalism" in a major speech on the economy today in which he is expected to suggest the need for greater transparency to help stem the worst excesses in business as well measures that will make it easier for co-operatives to be created.

And in an article for the Financial Times, Labour leader Ed Miliband has called for tighter regulation on takeovers to protect the long-term interests of British business, adding that hostile takeovers of recent years highlighted the "short-termism that blights British enterprise".

Central to the debate over the need for a greater morality in capitalism is the question of bankers' bonuses and in particular those banks, like RBS, which are predominantly owned by the taxpayer. There have been calls for bonuses in those banks in particular to be tightly regulated and for the government to be given the right to decide if their chief executives and other managers merit a bonus or not.

The former chairman of RBS, Sir George Mathewson, told Today presenter Evan Davis that, while he opposes bonuses for bankers who have not produced a profit, the decision on bonuses should remain with the bank's board and not the government.

"As far as the government saying something, it should be the board of the company who decides. And it should not be decided arbitrarily by the government but it should go the usual procedures through the board of the company."

And he added: "Bonuses should represent exceptional performance... I am, in general, not in favour of [in] investment banking culture, of reward by bonuses unless real performance, and I think share price is one measure of performance, justifies it."

The BBC's political editor Nick Robinson said that Mr Cameron "is aware of that public anger that increases the tighter the squeeze gets on what people have called Middle Britain.

"He has always tried to say 'I'm in favour of a sort of more moral capitalism'. But I think there is a real sense now he simply doesn't want the Labour leader to be able to occupy territory which he believes is quite politically potent."

And the BBC's business editor Robert Peston added that the government is set to announce a series of proposals which will put the responsibility on shareholders to limit such pay rises and which will call for more transparency and information on pay levels.

He explained that, other than a voluntary decision by business leaders to exercise serious restraint, a solution to concerns over bankers' bonuses is difficult to see, adding that "they show no desire to take serious pay cuts".

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